The SEC pried $1 million out of Regions (RE) today, settling with the Alabama bank over it’s role in a $255 million fraud of mostly Latin American investors.
The SEC has already charged unregistered broker-dealers U.S. Pension Trust Corp. and U.S. College Trust Corp. (USPT) for “deceptively charging investors exorbitant, undisclosed commissions and fees in the sale of mutual funds through a series of investment plans.” The SEC alleges that USPT has illicitly raised at least $255 million from more than 14,000 investors.
Regions Bank served as trustee of the investment plans, and now they’re paying for it.
SEC: According to the SEC’s complaint, filed in the Southern District of Florida, Regions Bank and its predecessor Union Planters Bank served as trustee of investment plans since October 2001. The investment plans gave investors a choice of making either annual contributions or a single, lump-sum contribution. Until March 2006, USPT did not disclose to investors that it subtracted substantial amounts of their contributions for payment of sales commissions and other fees. USPT deducted up to 85 per cent of initial contributions in the annual plans and as much as 18 per cent in the single contribution plans. The SEC alleges that USPT has illicitly raised at least $255 million from more than 14,000 investors.
According to the SEC’s complaint, Regions Bank’s own Trust Agreement and Trust Summary also were misleading and failed to disclose the nature and amounts of the commissions and fees charged investors (except for Regions Bank’s trust fees). Regions Bank stopped accepting new USPT investor trust relationships in January 2008, and stopped accepting additional contributions under existing plans in August 2009.
The investigation is continuing, but Regions settled the SEC’s charges today with a cease-and-desist order and payment of a $1 million penalty that will go to harmed investors.
“Regions Bank provided a false air of legitimacy to this scheme,” said the SEC’s Glenn Gordon. “Regions Bank was aware or should have been aware of USPT’s deceptive sales practices, yet agreed to participate in these investment plans and associate its name and reputation with USPT.”
Regions’ response? Spokesperson Tim Deighton tells us this:
We have cooperated fully with the SEC and have worked to resolve this issue promptly. This was a legacy relationship entered into by Union Planters Bank almost eight years ago and does not represent our current business focus or practices. While the SEC has found fault with USPT over the amount and disclosure of its fees and believes that Regions should have taken steps to correct USPT’s misleading disclosures, the Commission found that Regions appropriately informed clients of its own fees within its Trust Agreement.
The full SEC complaint here.
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